Ratio of Debt-to-Income

Lenders use a ratio called "debt to income" to determine your maximum monthly payment after your other monthly debts have been paid.

Understanding your qualifying ratio

Most underwriting for conventional mortgage loans needs a qualifying ratio of 28/36. An FHA loan will usually allow for a higher debt load, reflected in a higher (29/41) qualifying ratio.

For these ratios, the first number is the percentage of your gross monthly income that can go toward housing costs. This ratio is figured on your total payment, including homeowners' insurance, HOA dues, Private Mortgage Insurance - everything.

The second number is what percent of your gross income every month that should be spent on housing costs and recurring debt together. Recurring debt includes car loans, child support and credit card payments.

For example:

With a 28/36 ratio

• Gross monthly income of $8,000 x .28 = $2,240 can be applied to housing
• Gross monthly income of $8,000 x .36 = $2,280 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

• Gross monthly income of $8,000 x .29 = $2,320 can be applied to housing
• Gross monthly income of $8,000 x .41 = $3,280 can be applied to recurring debt plus housing expenses

If you'd like to run your own numbers, feel free to use our superb Mortgage Qualification Calculator.

Just Guidelines

Don't forget these are just guidelines. We'd be thrilled to go over pre-qualification to help you determine how large a mortgage you can afford.

Selectplus Lending can walk you through the pitfalls of getting a mortgage. Give us a call at (818)645-7035.